Green business equals good business

Scientific American, 28 November 2006 - Society may finally be at a tipping point over global warming. From one country to the next, many businesses are facing up to the realities of the climate crisis. But more concerted government action is still much needed, WBCSD President Björn Stigson wrote in a recent Scientific American article.

Businesses of all shapes and sizes are happily discovering that among those realities are many business opportunities.

In an article about California’s efforts to cut carbon emissions, the New York Times noted that many big companies, such as IBM, DuPont and Johnson & Johnson, “have found that steps to curb energy use through efficiency gains not only cut their power bills but often led to overall gains in productivity”.

Companies such as Chevron, Shell, Sanyo and Toyota are all taking out full-page ads to remind customers of how they are cutting carbon.

A few years ago, GE adopted its “Ecomagination” initiative, and GE Chairman and CEO Jeff Immelt noted recently that “with oil prices and other energy costs surging and with water scarcity concerns spreading, Ecomagination makes even more sense for our investors today than it did a year ago. Last year, we said that ‘green can be green’ – that we would make money helping customers meet their environmental challenges. A year later, we know that green is green, and that it will make a difference on the bottom line for GE investors as customer interest is accelerating.”

Other companies are joining the “green crusade.” Panasonic, for example, has formed the Panasonic Home and Environment Co., a new US group that focuses on green technology to improve energy efficiency in homes and the health of the home dwellers, that latter concern being a fairly new wrinkle in corporate energy-saving, carboncutting approaches.

DuPont, one of the first companies to announce environmental goals (nearly 20 years ago), recently announced its 2015 Sustainability Goals. These are meant to increase revenues by $6 billion or more by 2015, and it is planned that at least $2 billion of this added revenue will come from products that improve energy efficiency and/or reduce greenhouse gas emissions.

“Our top priority is to create value for our shareholders,” said DuPont Chairman and CEO Charles Holliday. “Many companies say that what’s good for the environment can also be good for business. We have a slightly different view: What’s good for business must also be good for the environment and for people everywhere in the world.” Such approaches come not just from individual companies but from groups of companies often with the support of organizations like the World Business Council for Sustainable Development.

One group, led by United Technologies Corporation, which makes much of the heating, air conditioning and elevator equipment found in buildings, and the Frenchbased, global cement and building materials company Lafarge, is focusing on energy efficiency in buildings. It has set goals of buildings being carbon neutral and energy neutral – and costeffective – by 2050.

Elsewhere, a number of cement companies accounting for over half of global production outside of China are developing guidelines for using various waste products in cement kilns instead of carbon fuels. This approach not only decreases the heavy output of carbon from the cement industry but also helps rapidly growing, developing countries manage their waste streams.

The Electricity Utilities Project, a group of utilities from four continents, is preparing a report that calls for new partnerships between the companies and governments to develop incentives for R&D and energy efficiency.

Carbon sensitivity is affecting the businesses that service businesses, such as the insurance sector. The Allianz Group, one of the world’s biggest insurers, recently teamed up with the World Wildlife Fund to produce a report with many recommendations for governments and companies on managing the risks of floods, droughts and forest fires expected to accompany climate change.

In early October, a coalition of 14 major institutional investors and other organizations that represent many trillions of dollars in assets published a Global Framework for Climate Risk Disclosure to help businesses determine what information should be provided to investors on the financial risks they face due to climate change.

Institutional investors such as California Public Employees Retirement System have already endorsed the framework and say they will use it to encourage companies to report more systematically on greenhouse gas emissions.

Just as companies are becoming more bullish on carbon-cutting, a growing number of optimistic reports are emerging that suggest that carbon control could be benefi- cial to entire economies. Research by Shell Springboard in the United Kingdom suggests that tackling climate change could create a huge new market for British business over the coming decade.

Similarly, the Norwegian government- appointed Commission on Low Emissions has concluded that the country can reduce greenhouse gas emissions by 50-80% by the year 2050 while losing little to no economic growth. The panel also reported that “investment in education, research, development, and testing of climate-friendly technologies will strengthen Norway’s technological expertise.”

Global warming, and efforts to control it, are going to produce winners and losers. Thoughtful companies and countries are convinced that by acting early, they can be among the winners.

This account of the business response to climate change has focused on the rosier hues – but there is still much disagreement among both companies and governments over how best to reduce the energy intensity of our national economies and de-carbonize the energy supply. Both are important keys to reverse global warming.

But, business cannot do it alone. Indeed, there are many places business simply cannot go without a path laid in public policies.

When electricity utilities market energy efficiency to customers they need to find ways to turn sales lost due to efficiency programs into some other form of value. These ways will probably require government support. Access to insurance against losses stemming from hostile weather or rising sea levels will also require government involvement and regulation.

Yet the governments in a number of the leading OECD countries have limited ability to mobilize support for difficult political tradeoffs. Global intergovernmental cooperation via the likes of the United Nations, World Bank and World Trade Organization remains weak and has limited capacity to bring the global community together on managing climate change.

Even the non-governmental organizations (NGOs) are divided.

Cutting carbon will probably require more nuclear plants. Yet there are protests in France against new nuclear power stations and in Britain against UK’s biggest coal fired power station, Drax, for emitting CO2.

Climate change is a global challenge brought on by myriad local actions. Its solutions must also be a combination of global and local initiatives with meaningful partnerships among companies, government and civil society groups.

The year 2007 is the 20th anniversary of the report of the World Commission on Environment and Development, Our Common Future. It noted that, “Properly managed, efficiency measures could allow industrial nations to stabilize their primary energy consumption by the turn of the century.” Written in 1987, that refers not to 2100 but to 2000.

The hoped for tipping point has been slow in coming. Today, the best examples of international action on climate change come from international companies. It’s high time for governments to do more.

This article has been written by Björn Stigson, President, World Business Council for Sustainable Development. For more information about the business response to the climate crisis, and what you can do, see www.wbcsd.org.

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This GREEN BUSINESS section appeared in the December 2006 issue of SCIENTIFIC AMERICAN magazine. Copyright © 2006 New Futures Media Inc.

Author Björn Stigson Publication Date 28 Nov 2006 Document Type WBCSD in the news WBCSD news Issue/Topic Business Role/CSR Energy & Climate Company Allianz SE Chevron Corporation DuPont General Electric Company IBM Corporation Johnson & Johnson Lafarge SA Royal Dutch Shell plc. Toyota Motor Corporation United Technologies Corporation Source Scientific American Include In RSS WBCSD News & Updates